Proposed HUD Rule on FMRs

The Department of Housing and Urban Development (HUD) recently published a proposed rule that aims to give low-income residents more choice by reworking the Section 8 housing-voucher program. The current program gives housing assistance through coupons that cover a portion of rents, and for a number of reasons, these vouchers are more frequently used in neighborhoods where poverty is the most prevalent and rent is the cheapest. The idea of using these vouchers for higher-rent communities—usually with better schools, less crime, and lower rates of poverty—is out of the question for many low-income tenants because it would mean covering extra housing expenses out of pocket. Instead, they stay in areas of concentrated poverty, exacerbating economic and racial segregation in many neighborhoods. In addition, many landlords in low-rent submarkets currently have the ability to collect subsidized rents greater than market rents.

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“The goal here is to expand the range of housing opportunities for low-income tenants who use the voucher program and enable them to move out of areas of concentrated poverty into communities with better opportunities.”

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This problem endures partly because current HUD policy determines vouchers using a formula that considers rent prices across an entire metro area—currently called 50th percentile Fair Market Rents (FMRs). Rents can vary widely within a city depending on what neighborhood you’re looking at, which is exactly why HUD’s new proposal plans to base its formula on rents across ZIP codes instead of cities—using what they call Small Area Fair Market Rents (Small Area FMRs). The goal here to is expand the range of housing opportunities for low-income tenants who use the voucher program and enable them to move out of areas of concentrated poverty into communities with better opportunities.

These proposed changes have already been enacted in Dallas, Texas, as an experimental federal program in 2011. With staggered maximum subsidies depending on ZIP codes, the changes enacted did exactly what they aimed to do. In 2011, Dallas voucher recipients lived in 129 ZIP codes. Four years later, they spanned across 163 different ZIP codes. This has allowed families to access a wider variety of public education and neighborhood resources, among many other benefits. Additionally, the overall cost of the program did not increase.

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“While the goal is to give poor and working class families expanded access to opportunity, HUD also hopes to eliminate predatory landlords by reducing payments available to ZIP codes with lower rents.”

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HUD’s proposal to move to Small Area FMRs is limited to select metro areas across the country that have significant rent differentials. While the goal is to give poor and working class families expanded access to opportunity, HUD also hopes to eliminate predatory landlords by reducing payments available to ZIP codes with lower rents. However, subsidies in poorer neighborhoods would decrease—a move that many landlords and tenant groups warn could increase evictions or force lower-income families to pay more rent.

The proposed changes are not final and are still subject to final review. HUD is seeking public comment by August 15 on the proposed rule. You can access the full proposal here.